Abitron Austria Takeaways: When Are Acts of Trademark Infringement Beyond the Lanham Act’s Territorial Reach?

Introduction

In Abitron Austria GmbH v. Hetronic Int’l, Inc. (U.S. June 29, 2023), the Supreme Court of the United States unanimously held that federal trademark law (the Lanham Act) does not apply to trademark infringement committed outside of the United States. The Court thus vacated a 2021 decision by the United States Court of Appeals for the Tenth Circuit that had held otherwise, and remanded the case back to the Tenth Circuit for further proceedings.

Easy enough to understand so far, right? But wait, there’s more.

Groups of Supreme Court justices parted ways on the next question, namely: when is an act of trademark infringement truly “outside” the United States? Phrased more particularly, what constitutes a permissible “domestic application” of the Lanham Act to an accused act of trademark infringement?

Writing for a 5-4 majority on this issue, Justice Samuel Alito held that the dividing line between impermissible extraterritorial application and permitted domestic application was whether the defendant made a “use in commerce” of the plaintiff’s mark, as defined in the Lanham Act, focusing upon the defendant’s conduct. Writing for the minority, Justice Sonia Sotomayor instead argued that the Lanham Act’s focus was protection against likelihood of confusion, and that this focus, together with the interests of the parties, further inform the analysis of whether a contemplated application of the Lanham Act would be “domestic.”

Concurring Justice Ketanji Brown Jackson elaborated upon “use in commerce” concepts, indicating that such use “can occur wherever the mark serves its source-identifying function.” However, Justice Alito flatly declined to discuss Justice Jackson’s opinion, quipping in a footnote: “[W]e have no occasion to address the precise contours of that phrase here.” Thus, Justice Alito’s majority opinion identifies a dividing line but provides no guidance on the “contours” of that dividing line.

Consequently, the Abitron Austria decision produces three main takeaways, further discussed below:

1. A trademark owner can no longer use the Lanham Act to address acts of infringement involving conduct lacking any United States connection, since this would involve an impermissible extraterritorial application of the Lanham Act.
2. The absence of any guidance on “use in commerce” principles in Justice Alito’s Abitron Austria majority opinion leaves open questions on what an actionable “use in commerce” is and where a “use in commerce” occurs. Thus, whenever an accused act of infringement involves conduct bearing a connection to the United States (beyond U.S. residency of the trademark owner), it will be an open question as to whether the connection is substantial enough to constitute a “use in commerce” that triggers Lanham Act liability. Existing statutory and case law can provide the foundation for available arguments by a trademark owner contending that application of the Lanham Act would be permissibly “domestic.”
3. In the wake of Abitron Austria, as protection against purely foreign acts of infringement, and against the uncertainty as to whether application of the Lanham Act would otherwise be deemed impermissibly “foreign,” trademark owners who use valued trademarks in foreign commerce should explore establishing: (a) contractual rights to govern conduct of parties with whom they enter into a business relationship involving goods or services identified by the mark; and (b) foreign trademark rights, to include obtaining one or more foreign trademark registrations, where available.

Conduct Lacking Any Connection to the United States Cannot Trigger Infringement Liability Under the Lanham Act

The longstanding “presumption against extraterritoriality” drove the Court’s Abitron Austria decision. For instance, back in 1949, the Court stated: “[L]egislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States.” Carrying that forward, the Court declared in a 2007 patent case: “The presumption that United States law governs domestically but does not rule the world applies with particular force in patent law.”

The first step in applying the presumption is inquiring “whether ‘Congress has affirmatively and unmistakably instructed that’ the provision at issue should ‘apply to foreign conduct.’” In the decision below, the Tenth Circuit held that the two infringement provisions of the Lanham Act did apply extraterritorially, relying upon a 1952 decision (Steele v. Bulova Watch Co.) in which a United States citizen committed infringing acts in Mexico. The Supreme Court in Abitron Austria disagreed with the Tenth Circuit’s conclusion, observing that neither infringement provision expressly states an intention to be applied extraterritorially. Hetronic argued that the expression “in commerce” in the infringement statutes necessarily permitted foreign application, since Congress can lawfully regulate some foreign commerce. The Court rejected that argument, citing precedent holding that even statutes expressly reciting the term “foreign commerce” were not extraterritorial. All justices in Abitron Austria were unanimous as to this step one analysis.

A court analyzes a second step in applying the presumption only if the step one analysis leads the court to conclude that the statute is not extraterritorial. Thus did the Court in Abitron Austria proceed to step two. The step two analysis inquires “whether the suit seeks a (permissible) domestic or (impermissible) foreign application of the provision.” This recitation of step two, by itself, did not generate controversy among the justices. What did, however, was Justice Alito’s sole focus on conduct to explain application of step two: “[T]o prove that a claim involves domestic application of a statute, ‘plaintiffs must establish that ‘the conduct relevant to the statute’s focus occurred in the United States.”

Specifically referring to the Lanham Act, Justice Alito continued: “And the conduct relevant to any focus the parties have proffered is infringing use in commerce, as the Act defines it.” He later concluded: “Under step two of our extraterritoriality standard, then, ‘use in commerce’ provides the dividing line between foreign and domestic applications of these Lanham Act provisions.” (emphasis added). As a Delaware federal court summarized in a July 18, 2023 decision: “In other words, the Supreme Court found that any domestic application of these provision[s] turned on whether the alleged infringing ‘use in commerce’ occurred in the United States.”

Justice Sotomayor criticized Justice Alito’s conduct-only focus as “myopic” for failing to recognize that the Lanham Act’s focus is to protect against likelihood of confusion. Indeed, Justice Sotomayor observed that the majority opinion did not even articulate what the Lanham Act’s focus is, instead choosing to refer to the parties’ particular submissions in the case. She stressed that given the Lanham Act’s focus upon likelihood of confusion, a court should inquire whether confusion occurred in the United States.

Regardless of which approach a court were to adopt, one takeaway is clear: an accused act of trademark infringement lacking any connection to the United States will now be indisputably beyond the Lanham Act’s territorial reach. That is not to say, however, that all evidence of foreign activity would be excluded in a trial. The above-mentioned Delaware decision permitted introduction of evidence of foreign-related activity as circumstantial evidence of infringement occurring within the United States, even though the plaintiff did not seek damages for foreign sales.

Open Questions Remain Regarding What a “Use in Commerce” Is and Where a “Use in Commerce” Occurs 

What is a “Use in Commerce” for Purposes of Infringement Liability?

The question of what an actionable “use in commerce” is technically remains open, since the Abitron Austria majority did not discuss the “precise contours” of that phrase. However, a backdrop of statutory and case law provides some guidance. Summarizing the definitional section of the Lanham Act, the Federal Circuit explained:

For trademarks, the “use in commerce” requirement is met when a mark is (1) placed on the good or container, or on documents associated with the goods if the nature of the goods makes placement on the good or container impracticable, and (2) that good is then “sold or transported in commerce.” 15 U.S.C. § 1127 (2006). For service marks, the “use in commerce” requirement is met when (1) a mark is “used or displayed in the sale or advertising of services” and (2) either (i) the services are “rendered in commerce” or (ii) the services are “rendered in more than one State or in the United States and a foreign country and the person rendering those services is engaged in commerce in connection with the services.” Id.

Section 1127 recites the above requirements in its definition of the noun “use in commerce,” i.e., “The term ‘use in commerce’ means the bona fide use of a mark in the ordinary course of trade, and not made merely to reserve a right in the mark.” This statutory definition of “use in commerce” focuses on the acts (conduct) of the person with respect to the mark at issue.

Citing § 1127, the Federal Circuit also observed: “Further, the Lanham Act defines ‘commerce’ as ‘all commerce which may lawfully be regulated by Congress.’”

Especially given the emphasis in § 1127 upon using a mark for the purposes of acquiring valid rights, instead of an infringement context, one could argue that the noun form of “use in commerce” in § 1127 differs from the verb form “use[s] in commerce” recited in the Lanham Act’s two infringement statutes quoted below (with emphasis added) and discussed in the Abitron Austria majority opinion.

• § 1114(a)(1)(A) (applicable to registered marks) imposes liability upon anyone “who shall, without the consent of the registrant[,] use in commerce [of] any reproduction, counterfeit, copy, or colorable imitation of a registered mark in connection with the sale, offering for sale, distribution, or advertising of any goods or services on or in connection with which such use is likely to cause confusion, or to cause mistake, or to deceive.”
• § 1125(a)(1) (applicable to non-registered marks) imposes liability upon one who “uses in commerce any word, term, name, symbol, or device, or any combination thereof, or anyfalse designation of origin, false or misleading description of fact, or false or misleading representation of fact, which . . . is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person.”

In Lanham Act trademark infringement litigation, a court must give effect to the totality of either statute, such that the verb-oriented expressions “use in commerce” and “uses in commerce” are not considered in a vacuum. In that regard, § 1114(a)(1)(A) does not restrict liability to only use of a mark in connection with a sale; it also extends liability to the “offering for sale” or “advertising” activities in commerce causing a likelihood of confusion with the registered mark. Additionally, § 1125(a)(1) imposes liability for “any false designation of origin” that is likely to cause confusion with another person.

Given the above differences between § 1127 on one hand, and §§ 1114(a)(1)(A) and 1125(a)(1) on the other, a trademark owner could argue that the Abitron Austria “dividing line” of “use in commerce” implicates the latter two statutes, which impose liability for a broader range of acts than just the sale of infringing goods or services contemplated in § 1127.

Where Does a “Use in Commerce” Occur?

Justice Alito’s Abitron Austria majority opinion stated: “The ultimate question regarding permissible domestic application turns on the location of the conduct relevant to the focus.” The question of where a “use in commerce” occurs remains open, since the Lanham Act does not provide express guidance. However, one may look to analogous case law analyzing specific personal jurisdiction issues.

In the analogous context of specific personal jurisdiction, courts have analyzed whether, under Rule 4(k)(2) of the Federal Rules of Civil Procedure, a foreign defendant’s accused acts could subject the defendant to being sued in a United States federal district court. Under this rule, as stated in a 2022 Ninth Circuit decision, “the plaintiff must prove: (1) the claim at issue arises from federal law; (2) the defendants are not subject to any state's courts of general jurisdiction; and (3) invoking jurisdiction upholds due process (namely, that jurisdiction is not unreasonable).” Here, a court focuses solely on a constitutional due process analysis without consideration of a state long-arm statute, the analysis assessing nationwide contacts. In this context, a court can exercise personal jurisdiction for torts committed within the United States or for intentional torts committed outside the forum state that cause tortious injury within the United States.

As to analyses of the first type of jurisdictional basis, one court observed in 2017: “the weight of authority holds that trademark infringement and unfair competition occur not where the plaintiff suffers an injury but rather where the defendant sells an allegedly infringing product.” This basis harmonizes with the Abitron Austria majority since it focuses on where the defendant sells the accused product, e.g., it likewise focuses solely on the defendant’s conduct.

As to analyses of the second type of jurisdictional basis, “case law dictates that injury from trademark infringement occurs in the state where the trademark owner resides.” Progressive Lighting, Inc. v. Décor Selections, LLC, No 1:20-cv-3840, slip op. at 19 n.5 (N.D. Ga. Sept. 17, 2021) (citing cases). As exemplified by the 2022 Ninth Circuit decision mentioned above, this same type of basis exists for Rule 4(k)(2) analyses, except that the defendant’s conduct is assessed with regard to the United States as a whole instead of any specific state.

The second type of jurisdictional basis should arguably remain valid after Abitron Austria, since it could be asserted in conjunction with the broader range of conduct actionable under the Lanham Act’s two infringement statutes discussed above, particularly when a plaintiff residing in the United States can make a case for intentional trademark infringement aimed at the plaintiff. For example, in a 2008 decision, the U.S. Court of Appeals for the Eleventh Circuit found that it was constitutional for a Florida district court to exercise personal jurisdiction over a defendant alleged to have intentionally used the plaintiff’s name and picture on the defendant’s website accessible in Florida.

Unlike Justice Jackson’s concurring opinion, neither the Lanham Act’s definition of “use in commerce” nor jurisdictional law considers whether a use in commerce “can occur wherever the mark serves its source-identifying function.” Even though Justice Alito did not directly comment upon Justice Jackson’s concurring opinion, one need not rely upon that opinion to subject a foreign defendant to liability for trademark infringement under the Lanham Act beyond the classic case of a sale of an infringing product in the United States. A trademark owner can cite the broader range of conduct actionable in the two Lanham Act statutes that mention the verb form of “use[s] in commerce” in the broad context of those statutes, and can argue Rule 4(k)(2) jurisdictional principles by analogy, as discussed above, to argue that application of those statutes against the foreign defendant would be “domestic” and not extraterritorial.

Contributory Trademark Infringement Theory Should Still Play a Role in Haling a Foreign Defendant Into a United States District Court if Domestic Infringement Occurs

As stated in a 2019 decision by the U.S. Court of Appeals for the Eleventh Circuit:

A claim for contributory trademark infringement has two elements: (1) a person or entity commits direct trademark infringement under the Lanham Act, and (2) the defendant (a) ‘intentionally induces’ the direct infringer to commit infringement, (b) supplies a ‘product’ to the direct infringer whom it ‘knows’ is directly infringing, (actual knowledge), or (c) supplies a ‘product’ to the direct infringer whom ‘it has reason to know’ is directly infringing (constructive knowledge).

Thus, a foreign party need not directly mark a good and sell it to be subject to Lanham Act infringement liability. In other words, such a foreign party need not itself perform the “use in commerce” triggering such liability. If the foreign party intentionally induces another to commit an infringement in the United States and the above remaining requirements are met, the foreign defendant should still be subject to Lanham Act liability under a contributory infringement theory, and this result should be unchanged by Abitron Austria.

Trademark Owners Should Consider Developing Contractual and Foreign Trademark Rights as a Hedge Against the Impact of Abitron Austria

As protection against purely foreign acts of infringement, and against the uncertainty as to whether application of the Lanham Act would otherwise be deemed impermissibly “foreign” under Abitron Austria, trademark owners who use valued trademarks in foreign commerce should explore establishing: (a) contractual rights to govern conduct of parties with whom they enter into a business relationship involving goods or services identified by the mark; and (b) foreign trademark rights, to include obtaining one or more foreign trademark registrations, where available.

Creating Contractual Rights. Although the Supreme Court’s opinion in Abitron Austria solely addressed trademark issues, Hetronic did not limit its claims to trademark counts; it also had asserted a breach of contract claim against Abitron Austria and other defendants. In the district court, a jury had awarded Hetronic over $100 million in damages, most of which had related to the defendants’ trademark infringement. Thus, although the Supreme Court’s opinion in Abitron Austria directly impacted the portion of the trademark-related award (97% of which was attributed to foreign sales), it did not impact the portion of the jury award relating to the breach of contract claim. Consequently, for a trademark owner who enters into business dealings with a foreign distributor or other foreign party who may use the owner’s marks, the contract governing the business arrangement should include provisions acknowledging trademark ownership and prohibiting use of the owner’s marks outside of expressly permitted (licensed) uses. Then the owner can resort to contractual remedies to obtain damages for uses of the mark overseas that occurred in breach of the agreement.

Perfecting Foreign Trademark Rights. A trademark owner using its marks (either itself or through another authorized user) in any foreign country should consider perfecting its trademark rights in each such foreign country, to include pursuing trademark registrations in countries that recognize them. This way, with foreign rights secured, a trademark owner can sue a foreign defendant in the relevant foreign country. A detailed discussion of procedures for perfecting foreign trademark rights is beyond the scope of this post; however, the International Trademark Association (INTA) published informative web pages on this subject titled “Filing a Trademark Application Outside the United States” and “International Trademark Rights.” See also slide deck published by USPTO titled “International Protection for Trademarks.” Trademark owners seeking additional information can (and should) consult with an experienced trademark attorney.